Drug maker goes social to end supply chain crisis

Sharon Gaudin |
July 25, 2011

Pharmaceutical company uses social collaboration to get everyone communicating.

Antonio Martins, vice president, supply chain, Teva Canada A few years ago, a Canadian pharmaceutical company found that it was in constant crisis mode, and its way out of the chaos lay in getting everyone to communicate.

The company, Ratiopharm Canada, was having a hard time being flexible enough to meet changes in demand. For example, the supply chain unit might not know for as long as four months that there had been a slowdown in production because of a manufacturing snafu or a quality control issue.

Ratiopharm found the answer was to get everyone to communicate. The generic drug manufacturer made that happen by using social collaboration tools .

"When the entire operation is stressed, it reverts to crisis mode," said Antonio Martins, who was vice president of supply chain in 2005 when he first introduced social collaboration tools at Ratiopharm. "We were in constant crisis mode. When the stress is lifted, suddenly things can be more orderly.... The entire operation becomes much more efficient."

Martins, who today is vice president of supply chain at Teva Canada , which bought Ratiopharm in 2010, said the problem stemmed from a lack of communication in the supply chain. If something went wrong anywhere in the supply chain process, it might be two to four months before the people who needed to know found out about it.

So how do you bridge such a chasm of communication? Martins turned to Web 2.0 technology and social collaboration tools, starting with Microsoft 's SharePoint, then switching to tools from Strategy-Nets and later Moxie Software, which is what the company uses today.

Martins said collaboration tools fixed the communication problems employees were having, and the improvement in communication fixed Ratiopharm's supply chain problem. Addressing those issues ultimately fixed the company's service problems and eventually saved jobs and enabled the company to survive during rocky times in the pharmaceutical industry.

Martins also noted that he worked on the backbone of the supply chain, tweaking processes and systems. However, the collaboration changes were the key that enabled the company to be flexible and handle ordering and market surprises.

"If you look at a supply chain, you want it to go smoothly," Martins told Computerworld. "No problems. No delays. No snags. But that never happens. The supply chain gets interrupted many, many times because of surprises.... Any time there was a problem to stop the supply chain, like a technical problem or customers' wanting more product, any time there was a surprise, it took a long time for that information to get out. It took two to four months to find out anything was wrong. This was very, very common."

Martins explained that back around 2005, Ratiopharm was having trouble because it took so long to find out that there had been a snafu somewhere along the supply chain. For instance, if unsightly black specks from a foreign substance suddenly appeared in the ingredients used to make a batch of tablets, the manufacturing process would have to be stopped and the tainted tablets would have to be removed.

"That batch that's sitting in barrels -- we're waiting for them and we don't know something is wrong," he said. "We have to detect what's going on as soon as possible.... We didn't want the situation to go through a hierarchy because that takes too long for bosses to talk to bosses."

Martins noted that at that point, the company had started using SharePoint, so he got his employees to use the software's message board. "Individuals would post the problem and other individuals would solve the problem," he explained. "We went from it taking two to four months to find out there was a problem, to two to four weeks, and then to a few hours or a couple of days."

Before Ratiopharm started using collaboration software, the company's service level, which refers to the percentage of orders that are fulfilled on time, was around 82 percent to 85 percent. Calling that level "terrible," Martins said the company shoots for a service level of 98 percent.

"When you're talking about medication, it can be very serious," he added. "We raised service levels in the first six months to around 95 percent. It was extremely important. When you go from 10 percent shortages to 5 percent, you have half the shortages. The stress in the supply chain and the company is cut substantially."

Martins noted that, at that point, the company didn't achieve the 98 percent goal but it did maintain a level of 95 percent.

Dan Olds, an analyst at Gabriel Consulting Group, said Martins turned to enterprise 2.0 technology in a smart way.

"He used the right tool -- collaboration -- to get the right parties talking," Olds said. "He wasn't just using social technology to use something new and fun. The lesson is that collaboration in business is a tool that helps bring about solutions to big problems. It's easier to get people to chime in on something like a collaboration tool. It's harder to get them to attend and participate in meetings."

He added that Web 2.0 tools can be highly useful in the enterprise , but he stressed that companies should have a specific goal or a specific problem to solve before they deploy them.

"It's important to keep in mind that these are tools and that they need to be implemented in a way that makes them useful and not just time-wasters," Olds said. "You have to have a good idea of what you want the end result to be before you just willy-nilly put something in place."

Martins and Ratiopharm did have a specific goal in mind when it decided to start using collaboration software, and the technology continued to be useful when the pharmaceutical industry was hit with Canadian regulatory changes in 2006. The changes, which varied by province, adjusted prices and imposed limits on the discounts manufacturers could offer, leading to fluctuations in sales. Ratiopharm and other drug makers were hit hard by those changes. And to deal with the tougher times, Martins once again turned to social software.

Sharepoint had worked well, but Ratiopharm wanted more social tools, so in 2007 Martins moved to Strategy-Nets software and extended the collaboration program beyond the supply chain to include customer service, sales and marketing.

From Strategy-nets, Ratiopharm moved to Moxie Software, which includes tools for real-time conversations, blogs, wikis and document-sharing. Martins said he also liked Moxie's offering because it has a sound architecture and is based on an open-source platform.

"That's how we came out of the hole," said Martins. "Prior to 2006, the market was very stable. Customers purchased pretty much in the same way all the time.... In 2006, the market became less predictable because of regulations and price changes. We were in a position where we couldn't supply the right things because we couldn't predict it. We had to connect customer service, sales and marketing in the front with supply chain so the supply chain people would know what to expect."

And it worked.

Once people in different departments were connected, they could make better market predictions and "react before business flash-floods hit," Martins said.

The expanded use of collaboration software, and the move to richer and more varied tools, helped the company achieve a service level of 98 percent for three years in a row. Moreover, Ratiopharm was able to manufacture its products three times faster, improving its ability to meet demand -- even surprise spikes in demand.

"I don't think we would have died, but we would have shrunk," said Martins, adding that he thinks jobs were saved because of the added collaboration among departments. "We were able to grow and save our position in the market, despite the market."

"If you have an operation where people can respond to changes very fast, it's an enormous weapon," he noted. "You have to be able to deal with surprises because the world has more surprises than nonsurprises."

While the pharmaceutical market continued to fluctuate, Ratiopharm and its supply chain stayed strong and flexible.

"I had the fastest supply chain in the industry," Martins said. "If work doesn't wait, work doesn't accumulate.... Everything goes faster and smoother. The company becomes more orderly. You go from a perpetual state of crisis to a state that is calm an orderly."

That more-agile supply chain and corporate stability helped to catch the eye of Teva Canada, a major supplier of generic pharmaceuticals in Canada and an arm of Israel-based Teva Pharmaceuticals. In 2010, Teva bought Ratiopharm and its supply chain, acquiring its expertise in collaboration as part of the package.

Prior to that acquisition, Teva had struggled during the period of upheaval in the pharmaceutical industry. Teva's service level was below 90 percent and its manufacturing time was around 80 days, according to Martins.

However, in January, after the acquisition, Martins and his team introduced Moxie's collaboration software into Teva's operations.

Now the company's service level is between 90 percent and 95 percent. Martins said he hopes it will be over 95 percent by the end of the summer. Moreover, Teva's manufacturing cycle time has improved from 80 days to 35-40 days, and the expectation is that it will drop to 25 days by the end of the summer.

"You establish environments in which employees can declare there's a problem," Martins said. "Collaboration allows us to see what's going on in-house.... If you're talking about how your company produces, you have a core that makes everything faster."